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Economy in Brief

Japan Machinery Orders Dig Out
by Robert Brusca November 11, 2009

Japan’s machinery orders rose by 6% in September. Core machinery orders spurted by 10.5%. Foreign demand is the whole of the pickup as domestic orders fell by 5.4% while foreign orders rose by 25.9% both in September.

The three month metrics show that core orders are still not out of the woods; their three month growth rate is just 2.9% annualized the same as their six month growth rate. Still these two horizon growth rates are better than the -21.8% Year-over-year performance. Core machinery orders are no longer falling but they are not rising very rapidly.

The same sort of shortfalls exist across countries

Moreover Japan like Germany is benefiting from external growth. Over three months, foreign demand is up at a 180% annual rate that is an acceleration from a 60.4% annual rate over six months and those numbers reverse the 42% drop in foreign demand Yr/Yr. Still, domestic demand is wanting. Over three months it is up at a 19.9% pace, better than the -1% rate over six months, and that is an improvement from the drop of 14.9% Yr/Yr.

On balance Japan’s orders are on the mend. Even domestic orders are showing a push into positive territory. But these series are very volatile and given the volatility the recent domestic growth figures are not very impressive. Much more impressive is the growth in foreign orders that seems to be jumpstarting Japan as a whole.

As the global economy turns to recovery one key challenge is going to be to see if surplus and deficit countries begin to make adjustments. Note that Japan and Germany, traditional exporting powers, continue to get a lot of their stimulus from overseas. China’s trade surplus was up this month. How is the US going to keep the lid on its deficit if everyone else is running surpluses? Large structural trade imbalances and the persisting investment flows they imply was one of the main sources of instability in this past cycle. Is anything going to change?

Japan Machinery Orders
  m/m % Saar %
SA Sep-09 Aug-09 Jul-09 3-Mos 6-Mos 12-Mos 12-Mo Ago
Total 6.0% -1.9% 7.5% 56.1% 2.6% -26.5% -2.5%
Core Orders* 10.5% 0.5% -9.3% 2.9% 2.8% -21.8% -3.7%
Total Orders
Foreign Demand 25.9% -15.7% 21.8% 180.0% 60.4% -42.2% -3.5%
Domestic demand -5.4% 7.1% 3.4% 19.9% -1.0% -14.9% -2.8%
* Excl ships and electric power
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